all right let's move on to another fun and exciting area welcome welcome to
white earnings per share
ETPs now what is earnings per share earnings per share as 10 most talked
about numbers in the financial statements creditors want to know about
investors want to know about it basically they're saying hey I need this
information
it is information is required to disclose on the face
the income statement for publicly held companies will expand on that in a
minute
but what is earnings per share a lot of people think earnings per share is how
much money I'm gonna get it the dividend
no its calculated the same way each year so you can compare one year to the next
year to the next year
so we have to calculate in a way that is consistent from year to year to year
what errands per share means it is theoretically
how much each shareholder would get if
the company paid out all a bit income in the form
other David it's not how much you're really gonna get but
if the company were to pay out all a bit income at the district all its income
how much would you as a common shareholder
burned per share that's why it's called earnings per share
that would be earnings per share of common stock now
where we disclose it says it is required to present information
four basic and diluted on the face up the income statement
now remember my income statement we're gonna cover this in detail in another
section
I like to go surfing on time I
OC operating non-operating taxes gives you
income from continuing operations cuz you expect that to happen every year
then you got discontinued or disposal
and extraordinary and then you have net income you are required to show it on
the face if the income statement
income from continuing and net income you also need to
show either on the face or in the footnotes for the D in the e
so these to your gonna show in the face or the footnotes
but on the face you have to show these two you don't have to show
earnings per share for comprehensive income you don't have to show it for
earnings proper cash flows and blah blah blah
but you do need to show it for this so that's where you gonna show what
on the face
to the income statement and we're gonna show it for two things the two terms are
called
basic and diluted basic and diluted
basic is known as yours simple capital structure it's called basic
or sample it basically says there's no pro 10 Julie dilutive securities
there's real basic there's nothing that can be converted into common stock
what kinda things could be converted to common stock options rights and warrants
get stock option converted to common stock
convertible per for convertible bonds
those could be converted into common stock those are
potentially dilutive so simple said those are sampled they're not there
complex are diluted
is called a complex right this is simple
right kinda like my ex girlfriend I
stempel this is complex kinda like my wife
Anna very complex now what does that mean it means that
this says there are potentially dilutive securities
and missus anyone who could convert
so the assumption here than one who could convert does sell
it doesn't even matter if they were really do can burqas this is a
theoretical number only
another word could they convert yes they could doesn't matter if they did
could a yes and what everyone's earnings per share go down if they did
yes that means that dilutive it dilutes earnings per share
and other words bernie's per share to get less and less and less
that mean someone's giving up less than getting more everybody gets less
that's called diluting earnings per share so when we talk about is it
diluted that means it's
everyone like you're making orange juice in the morning right I grew up
and we have to buy frozen orange juice the open up from the container
if you add too much water it gets to week
right to dilute it so that's what we mean by dilutive
is a diluting is a breaking down so we're talking about the different
capital structures
we have a basic capital structure that consists of common stock and nothing
else potentially dilutive
we have a complex capital structure called diluted
and that is common stock in anything that could potentially be
converted in to common stock so that's what we're looking at
as far as diluted are fully diluted